Friday, 30 September 2011

US economic reports on Thursday were quite positive for a change. Reuters reports:

The chances of the U.S. economy averting a new recession got a boost on Thursday with claims for jobless benefits falling to a five-month low last week and growth a touch stronger in the second quarter than previously estimated.

Initial claims for state unemployment benefits fell 37,000 to 391,000 last week while second quarter GDP growth was revised to an annual rate of 1.3 percent from 1.0 percent, with consumer spending and export growth turning out stronger than earlier estimated.

Housing remains a weak spot in the US economy though as pending home sales fell 1.2 percent in August.

What most investors are interested about Germany at the moment, however, is how willing it is to bail out Greece. From Bloomberg:

German lawmakers are set to back an expansion of the euro-area rescue fund’s firepower as European officials turn to look at what next steps may be needed to stem the debt crisis.

The plan before the lower house in Berlin today would allow the fund to buy bonds of distressed states and offer emergency loans to governments, raising Germany’s guarantees to 211 billion euros ($287 billion) from 123 billion euros. The main opposition Social Democrats and Greens have said they will vote with Chancellor Angela Merkel’s government, assuring passage.

Wednesday, 28 September 2011

The surge in US stocks on Monday spilled over into Asian and European stocks on Tuesday. The MSCI Asia Pacific Index climbed 4.1 percent to 113.47, its biggest advance since April 2009. The STOXX Europe 600 Index rose 4.4 percent to 229.91, its biggest gain since May 2010. A late sell-off left the Standard & Poor's 500 Index at 1,175.38 at the close on Tuesday for a gain of 1.1 percent.

The surge in stocks came despite lacklustre economic reports on Tuesday.

In the US, consumer confidence improved only marginally in September, the Conference Board’s consumer confidence index edging up to 45.4 from 45.2 in August. The Richmond Federal Reserve's manufacturing index also improved to -6 from -10 in August but the S&P/Case-Shiller composite index of single-family homes in 20 metropolitan areas were unchanged in July on a seasonally adjusted basis.

In the UK, retail sales weakened, with the Confederation of British Industry's retail sales balance from the distributive trades survey declining to -15 in September, the lowest since May 2010, from -14 in August.

In Germany, consumer confidence data came in mixed on Tuesday. GfK reported that its forward-looking consumer-climate index is set to come in unchanged at 5.2 in October. However, the economic-expectations index has fallen sharply to 4.8 in September from 13.4 in August and 44.6 in July.

Monday, 26 September 2011

Economic data are increasingly pointing to an imminent global recession.

In the United States, the Economic Cycle Research Institute reported on Friday that its Weekly Leading Index for the US economy fell to 122.2 in the week ending 16 September from 122.8 the previous week. The annualised growth rate fell to minus 6.7 from minus 6.1. These are readings that, in the past, have often been associated with recessions.

A day earlier, though, another leading index had provided a less pessimistic signal. The Conference Board reported on Thursday that its Leading Economic Index for the US increased 0.3 percent in August after having risen 0.6 percent in July.

Even here, however, the message was not unambiguously positive. The increase over the six months to August was 2.4 percent, down from 4.0 percent in the previous six months. Furthermore, only four of the ten indicators contributed positively to the index in August while six contributed negatively. The biggest positive contributor by far was real money supply but, as I pointed out in "No QE3 for now", this indicator has been a poor leading indicator of the economy in recent years.

Economic data from Europe were also negative. A flash estimate of purchasing managers indices from Markit Economics last week showed that eurozone economies may already be contracting. The composite PMI came in at 49.2 in September, down from 50.7 in August and below the 50.0 mark that indicates no change in the level of activity. Both the manufacturing and services sectors contracted, the manufacturing PMI falling to 48.4 in September from 49.0 in August and the services PMI falling to 49.1 from 51.5.

Even supposedly fast-growing China may be contracting. The flash estimate of HSBC's manufacturing purchasing managers index for China fell to 49.4 in September from 49.9 in August.

Meanwhile, investors certainly seem to be losing confidence. Markets performed poorly last week.

Stock markets around the world fell. The Standard & Poor's 500 Index dropped 6.5 percent to 1,136.43 last week, the Stoxx Europe 600 Index dropped 6.1 percent to 216.19 and the MSCI Asia Pacific Index dropped 7.1 percent to 111.73. Asian stock markets have fallen 20.7 percent since 2 May and joined their European counterparts in bear market territory last week.

Commodities also suffered last week. The Thomson Reuters/Jefferies CRB Index fell 8.4 percent to 301.87 over the week. Gold, a safe haven from risk aversion in recent years, did not escape this time, falling 9.7 percent over the week and 5.9 percent on Friday alone to settle at $1.639.80 an ounce.

Investors' confidence depends much on developments over the European sovereign debt situation. The latter has deteriorated again recently, with Greek two-year note yields surging almost 15 percentage points to 69.7 percent last week. The 10-year yield rose 2.4 percentage points to 23.6 percent.

Contagion was clearly in the minds of investors. In Italy, the third largest economy in the euro area, the 2-year yield rose 9 basis points to 4.25 percent last week while the 10-yield rose 12 basis points to 5.63 percent despite indications that the European Central Bank was buying Italian bonds.

Meanwhile, the yields for safe-haven bonds were moving in the opposite direction. German 10-year yields dropped 11 basis points last week to 1.75 percent while US 10-year Treasury yields fell 18 basis points to 1.82 percent.

Not surprisingly, meetings held over the weekend by the International Monetary Fund and the Group of 20 were focused on the European sovereign debt problem. Much was discussed, including the bolstering of the European Financial Stability Facility that had been set up to lend to countries facing difficulties in raising funds. It remains to be seen, though, what concrete actions will actually be taken to resolve the crisis.

While policy-makers in Europe struggle to contain the sovereign debt problem, however, the recent data are showing that global economic growth may already be fading.

Saturday, 24 September 2011

U.S. stocks rose, trimming the Dow Jones Industrial Average’s worst weekly loss since 2008, European equities rebounded and Treasuries fell amid signs policy makers will act to prevent the debt crisis from worsening. Silver plunged the most since at least 1979.

The Dow added 0.4 percent to 10,771.48 at 4 p.m. New York time, paring this week’s loss to 6.4 percent. The Standard & Poor’s 500 Index climbed 0.6 percent to 1,136.43 after losing 7.1 percent in the first four days of the week. The Stoxx Europe 600 Index rose 0.6 percent. Ten-year Treasury yields surged 11 basis points to 1.82 percent after touching a record low 1.67 percent. Silver sank 18 percent and gold slid 5.9 percent, giving futures the biggest two-day loss since 1983.

However, the damage suffered by markets over the past two months has already hurt confidence around the world. On Friday, France became the latest to report a fall in confidence, with Insee reporting that its business confidence index fell to 99 in September from 105 in July while its household confidence index dropped to 80 in September from 82 in August.

Friday, 23 September 2011

Stocks fell, pushing the MSCI All- Country World Index of 45 nations into a bear market for the first time in more than two years, after the worsening European debt crisis and threat of a U.S. recession erased more than $10 trillion from equities since May.

The MSCI index has lost more than 20 percent since peaking on May 2, meeting the common definition of a bear market, after slipping 4.5 percent to a 13-month low of 277.38. The MSCI World Index of shares in developed nations also fell into a bear market yesterday, plunging 4.2 percent. The MSCI Emerging Markets Index reached the 20 percent threshold on Sept. 13.

Reports from the euro area on Thursday were also negative. The flash estimate of the eurozone composite purchasing managers index from Markit Economics fell to 49.2 in September from 50.7 in August, with the services PMI falling to 49.1 from 51.5 and the manufacturing PMI falling to 48.4 from 49.0. In addition, data on eurozone industrial orders for July showed a drop of 2.1 percent, the biggest drop since September 2010, while eurozone consumer confidence fell to the lowest in two years in September.

US economic data were more positive. Home prices rose 0.8 percent in July, according to the Federal Housing Finance Agency. In addition, the Conference Board's leading economic index climbed 0.3 percent in August after a 0.6 percent gain in July and applications for jobless benefits decreased 9,000 in the week ended 17 September. However, Bloomberg's Consumer Comfort Index fell to minus 52.1 in the week to 18 September from minus 49.3 the prior week.

Thursday, 22 September 2011

The Federal Reserve announced another round of monetary stimulus on Wednesday. Bloomberg reports:

The Federal Reserve will replace $400 billion of short-term debt in its portfolio with longer- term Treasuries in an effort to further reduce borrowing costs and counter rising risks of a recession.

The central bank will buy bonds with maturities of six to 30 years through June while selling an equal amount of debt maturing in three years or less, the Federal Open Market Committee said today in Washington after a two-day meeting. The action “should put downward pressure on longer-term interest rates and help make broader financial conditions more accommodative,” the FOMC said...

The central bank said today it will also reinvest maturing housing debt into mortgage-backed securities instead of Treasuries “to help support conditions in mortgage markets.”

The Standard & Poor’s 500 Index tumbled the most in a month, losing 2.9 percent to 1,166.76 at the 4 p.m. close in New York and extending a three-day drop to 4.1 percent. Ten-year Treasury yields dropped to a record low and 30-year bond rates slid to the lowest since January 2009, while two-year yields rose. The Dollar Index climbed 1 percent to a seven-month high of 77.802. Lead, nickel and sugar fell more than 3 percent to lead the S&P GSCI Index to a one-month low...

“Markets took note of the Fed’s downward revision of the economic outlook and upgrading of downside financial risks,” Mohamed A. El-Erian, chief executive officer at Pacific Investment Management Co. in Newport Beach, California, wrote in an e-mail. Pimco is the world’s largest bond-fund manager. “While Fed purchases can influence Treasury and mortgage valuations, it is limited in its ability to deliver economic outcomes.”

US investor sentiment was also soured by news of cuts in the credit ratings of Bank of America, Wells Fargo and Citigroup by Moody's Investors Service.

Elsewhere on Wednesday, Japan reported a huge trade deficit for August after imports jumped 19.2 percent from a year ago. Exports were also up by 2.8 percent, the first year-on-year rise in six months.

Wednesday, 21 September 2011

Investors in Europe shrugged off the Italian credit rating downgrade to push the STOXX Europe 600 up 1.8 percent on Tuesday. US stocks, though, finished the day in negative territory. Bloomberg reports:

U.S. stocks fell, erasing a 1.4 percent rally by the Standard & Poor’s 500 Index, amid concern international officials won’t make a decision on Greece’s next aid payment until October...

The S&P 500 lost 0.2 percent to 1,202.09 at 4 p.m. New York time. The difference between two- and 30-year Treasury yields fell to 304 basis points amid speculation the Federal Reserve will increase holdings of longer maturities. Credit-default swaps on Italy jumped 25 basis points to a record 514 basis points after S&P cut the nation’s rating. Oil added 1.4 percent.

Economic reports on Tuesday were mixed.

In the US, housing starts fell 5.0 percent in August but building permits rose 3.2 percent. This follows a report on Monday that the National Association of Home Builders/Wells Fargo sentiment index had decreased to 14 in September from 15 in August.

In Germany, investor confidence fell to the lowest in more than 2 1/2 years in September, with the ZEW index falling to minus 43.3 from minus 37.6 in August.

In its latest World Economic Outlook, the IMF says that the global economy is entering a "dangerous new phase". It forecasts that global growth will moderate to about 4 percent through 2012, from over 5 percent in 2010, with the advanced economies growing at 1½ percent in 2011 and 2 percent in 2012. It added that the "risks are clearly to the downside".

Tuesday, 20 September 2011

Global markets slumped on Monday amid concern Greece will fail to qualify for more financial aid but US stocks managed to end off their lows. Bloomberg reports:

The Standard & Poor’s 500 Index retreated 1 percent to close at 1,204.09 at 4 p.m. New York time, after plunging as much as 2.3 percent. The Stoxx Europe 600 Index ended down 2.3 percent. The euro depreciated 0.8 percent versus the U.S. currency and the Dollar Index rose for a second day. Ten-year Treasury yields fell nine basis points and the similar-maturity Greek yield rose 183 points. Copper sank to a nine-month low and oil slid 2.6 percent to the lowest price in three weeks.

Monday, 19 September 2011

Europe's sovereign debt crisis appears no closer to resolution after talks in Poland over the weekend. Reuters reports:

EU finance ministers broke no new ground in dealing with the euro zone debt crisis in discussions over the weekend, instead absorbing some ideas and rejecting others and taking stock of progress on agreed steps.

Investors seem to be expecting something dramatic to happen eventually though. From WSJ:

A majority of investors expect the euro zone's debt crisis to end with massive central-bank buying of bonds, but almost a quarter expect the breakup of the currency bloc, a Barclays Capital survey of more than 500 institutional investors showed...

Of the 500 investors surveyed, 56% expect the European Central Bank will undertake large-scale buying of sovereign debt from troubled countries like Italy and Spain, with some seeing fiscal union as the end result...

But 24% of those surveyed said that they expect a euro-zone breakup lies at the end of the sovereign debt crisis...

Greece is at the epicentre of the crisis and is likely to remain a focus of investors' attention. From Bloomberg:

Greece’s ability to avoid default hangs in the balance this week as international monitors get set to assess whether Prime Minister George Papandreou can meet the conditions of rescue loans.

European Union and International Monetary Fund inspectors hold a teleconference call today with Finance Minister Evangelos Venizelos, to judge whether the government is eligible for its next aid payment due next month and on track for a second rescue package approved by EU leaders July 21.

Saturday, 17 September 2011

India's central bank on Friday raised interest rates by a quarter of a percentage point in its 12th hike since March last year to combat near double-digit inflation.

The Reserve Bank of India (RBI) raised its repo rate at which it lends to commercial banks by 0.25 basis points to 8.25 percent and increased the reverse repo -- the rate it pays to banks for deposits -- to 7.25 percent.

The RBI has become an exception though, as most other central banks that had been on a tightening path are now on hold, including, notably the ECB, or even started easing, for example, Brazil.

The shift in most central bank stances has helped markets rebound. That rebound continued on Friday, with the S&P 500 and the STOXX Europe 600 both up 0.6 percent, the former completing its fifth consecutive day of gain.

Friday, 16 September 2011

The two most important central banks in the world took coordinated action on Thursday to ease market nervousness. Bloomberg reports:

The European Central Bank said it will lend dollars to euro-area banks in a series of three-month loans as the region’s debt crisis limits market access to the U.S. currency.

The Frankfurt-based ECB said it will coordinate with the Federal Reserve and other central banks to conduct three separate dollar liquidity operations to ensure banks have enough of the currency through the end of the year. The three-month loans are in addition to the bank’s regular seven-day dollar offerings and will be fixed-rate tenders with full allotment, the ECB said in a statement today. They will be offered on Oct. 12, Nov. 9 and Dec. 7.

Ironically, the injection of liquidity came on a day when data were showing that inflation in the euro area and the US remains far from comfortable levels.

In the euro area, the inflation rate for August was 2.5 percent, unchanged from July.

In the US, the consumer price index increased 0.4 percent in August, resulting in the year-on-year increase in the CPI rising to 3.8 percent compared to 3.6 percent in July. In addition, a 0.2 percent rise in industrial production helped push capacity utilisation up 0.1 percentage point to 77.4 percent in August, the highest level since August 2008.

Thursday, 15 September 2011

Reuters reports that EU officials are warning about a credit crunch threat.

European finance ministers have been warned confidentially of the danger of a renewed credit crunch as a "systemic" crisis in euro zone sovereign debt spills over to banks, according to documents obtained by Reuters on Wednesday.

In a report prepared for ministers meeting in Poland on Friday and Saturday, senior EU officials said the 17-nation currency area faces a "risk of a vicious circle between sovereign debt, bank funding and negative growth."

This comes on a day in which Moody's Investors Service downgraded two French banks -- Societe Generale and Credit Agricole -- and two unidentified banks were reported to have tapped the European Central Bank for US dollar funding.

For all the gloomy talk about Europe's debt problems, however, markets have been having a good run. Bloomberg reports:

Stocks rallied, sending the Standard & Poor’s 500 Index higher for a third day, and the euro extended gains as German and French leaders expressed support for Greece to remain in the euro monetary union and speculation grew that China may help Europe’s most-indebted nations.

Wednesday, 14 September 2011

Despite the slowing global economy, there are still signs of inflation.

In the UK, the Office for National Statistics reported on Tuesday that consumer prices rose 0.6 percent in August, taking the annual inflation rate up to 4.5 percent from 4.4 percent in July.

In France, national statistics office Insee reported that the inflation rate accelerated to 2.4 percent in August, the highest since October 2008, from 2.1 percent in July.

Not all economies are reporting accelerating inflation though.

Elsewhere in Europe last week, Germany reported that its inflation rate fell to 2.5 percent in August from 2.6 percent in July.

And in the US, a Labor Department report on Tuesday showed that import prices fell 0.4 percent in August, reversing the 0.3 percent increase in July. However, that still left import prices 13.0 percent higher than a year ago.

Ironically, Tuesday saw a call for further monetary stimulus from a central banker in what appears to be the country with the biggest inflation problem. From Reuters:

The Bank of England must take urgent steps to stimulate the sluggish economy and should work with the government to set up a new bank to boost lending to smaller companies, Bank policymaker Adam Posen said on Tuesday.

Tuesday, 13 September 2011

Greece’s chance of default in the next five years has soared to 98 percent as Prime Minister George Papandreou fails to reassure international investors that his country can survive the euro-region crisis...

The ASE Index of Greek stocks fell 4.4 percent to 847.48, from 1,286 on July 22. Greece’s two-year note yields jumped more than 12 percentage points to a euro-era record 69.551 percent, after climbing 9.8 percentage points last week.

Greek stocks were not the only ones that fell sharply on Monday. The STOXX Europe 600 lost 2.5 percent to close at 218.93, extending its fall from its peak on 17 February to 24.8 percent. European stocks have now lost more than half of the gains made since the market bottomed in March 2009.

US stocks managed to rise however after a report came out that Italy was in talks with China about possible investments. The S&P 500 ended up 0.7 percent.

Monday, 12 September 2011

Bloomberg says that data released over the weekend from China show that its economy is not facing a hard landing.

China’s record imports and a rebound in lending signaled strength in demand that offers a bright spot in a global economy contending with Europe’s debt crisis and weakening U.S. job gains.

Shipments from abroad jumped 30 percent and new local- currency loans were a more-than-forecast 548.5 billion yuan ($86 billion), government reports in the past two days showed...

Exports in August jumped a more-than-estimated 24.5 percent to $173.3 billion, just shy of the previous month’s record.

However, China did not escape the effects of a global recession in 2008 and is again unlikely to escape if another one comes around.

And investors don't seem too impressed by the prospects in China. The Shanghai Composite Index fell 1.2 percent last week to close at 2,497.75. It has lost 11.1 percent since the beginning of the year.

Saturday, 10 September 2011

Stocks sank, while the euro touched a ten-year low versus the yen and a six-month low against the dollar, as concern grew about Greece’s debt crisis. European bank and sovereign credit risk reached all-time highs as 10-year Treasury yields slid to a record. Oil fell 2 percent.

The MSCI All-Country World Index retreated 2.9 percent and the Standard & Poor’s 500 Index slipped 2.7 percent to 1,154.23 at the 4 p.m. close in New York, wiping out a weekly gain. The euro sank as much as 2.1 percent to 105.3 yen and fell 1.8 percent to $1.3627 before trimming losses. Ten-year Treasury yields slid as low as 1.89 percent. Credit-default swaps signaled a more than 90 percent probability Greece will default.

While markets were mostly focused on Greece and Europe, there were also important economic reports out from Asia on Friday.

In Japan, the government reported that GDP shrank 0.5 percent in the second quarter, worse than an earlier estimate of a 0.3 percent contraction.

In China, inflation eased to 6.2 percent in August from 6.5 percent in July. However, growth in industrial production slowed to 13.5 percent in August from 14 percent in July. Retail sales and fixed asset investment also slowed in August.

Friday, 9 September 2011

The European Central Bank signaled on Thursday that it had halted a cycle of interest rate rises begun just five months ago, saying euro zone inflation risks were no longer skewed to the upside and economic growth would be slow at best.

ECB President Jean-Claude Trichet said there were "intensified downside risks" to the economic outlook for the 17-country euro zone, marking a significant change in stance from last month when the bank was focused on inflation risks.

The OECD would probably have approved these decisions. In a report released on Thursday, it said that economic recovery appears to have come "close to a halt" in the major industrialised economies. It recommended that central banks keep policy rates at present levels and consider lowering rates "when there is scope".

A faltering economic recovery certainly looks a real risk in Japan, based on data released on Thursday. Core machinery orders fell 8.2 percent in July, a sharp reversal from the 7.7 percent rise in June.

Thursday, 8 September 2011

Stocks rose, rebounding from a four- day global slump that drove valuations to the lowest level since 2009, amid speculation President Barack Obama’s plan for more than $300 billion in economic stimulus will boost growth. Treasuries, German bunds and gold fell as the dollar snapped a six-day rally.

The MSCI All-Country World Index surged 2.8 percent and the Standard & Poor’s 500 Index jumped 2.9 percent at 4 p.m. in New York. The 10-year Treasury yield added six basis points to 2.04 percent after reaching a record low yesterday, and Germany’s yield climbed six basis points to 1.91 percent. The dollar weakened against the euro after legal challenges to Germany’s role in the region’s rescue funds were rejected by the nation’s top court. Gold dropped the most in two weeks and copper advanced above $9,000 a metric ton in London.

Tuesday, 6 September 2011

Stocks fell, Italian bonds dropped for an 11th day and the cost of government and bank default insurance rose to records on concern Europe’s debt crisis will worsen. The euro weakened, while the dollar and gold gained.

The MSCI All-Country World Index sank 2 percent at 4:31 p.m. in New York. Banks led the Stoxx Europe 600 Index down 4.1 percent in the biggest two-day slump since March 2009. Italy’s 10-year bond yield rose 27 basis points in the longest sequence of gains since the euro’s debut in 1999. The German bund yield fell to a record low of 1.84 percent. Rates on two-year Greek debt exceeded 50 percent for the first time. Gold futures jumped 1.4 percent. Standard & Poor’s 500 Index futures lost 2.3 percent at 6:24 p.m.

Monday, 5 September 2011

The economic data last week on the whole show that the United States economy is probably continuing to grow but at a weakening pace.

July data released by the Commerce Department were quite positive. Real consumer spending rose 0.5 percent in July while factory orders jumped 2.4 percent.

Data for August were less positive.

The Conference Board's consumer confidence index fell to 44.5 in August from 59.2 in July.

The Institute for Supply Management's manufacturing PMI in August was 50.6, staying in expansion territory but declining from 50.9 in July. The new orders index edged up to 49.6 in August from 49.2 in July but remained below 50 for the second consecutive month.

The week ended with the Labor Department reporting that total nonfarm payroll employment was unchanged at 131.1 million in August. The unemployment rate was also unchanged at 9.1 percent.

Zero growth in employment looks bad but the weakness was exaggerated by 45,000 workers at Verizon Communications going on strike, which pulled down the total employment. These workers began returning to work on 22 August and will boost September's employment number.

The monthly changes in employment can be somewhat volatile so even a reading of zero growth in one month may not necessarily indicate a recession. The ISM's manufacturing employment index for August was at 51.8, indicating that factory employment continued to expand. The index, though, was significantly down from 53.5 in July.

The employment numbers are probably not yet indicative of a recession. But they got a bit closer in August.

Saturday, 3 September 2011

Payrolls were unchanged, the weakest reading since September 2010, the Labor Department said today in Washington. The median forecast in a Bloomberg News survey called for a gain of 68,000. The figures included a 48,000 drop in the information industry, mostly reflecting a strike at Verizon Communications Inc. (VZ) The jobless rate held at 9.1 percent.

Even China is seeing only mixed readings in manufacturing. HSBC's manufacturing PMI rose to 49.9 in August from 49.3 in July, remaining below 50. The China Federation of Logistics and Purchasing's PMI though rose to 50.9 last month from 50.7 in July.

Thursday, 1 September 2011

Canada’s economy shrank in the second quarter for the first time since the recession two years ago, as a high dollar boosted imports and curbed exports while natural disasters interrupted energy and automobile production.

Gross domestic product fell at a 0.4 percent annualized pace during the April-June period following a 3.6 percent gain in the first three months of the year, Statistics Canada said today in Ottawa. Economists surveyed by Bloomberg forecast no growth in the quarter, based on the median of 23 responses, with nine calling for an expansion and six for a contraction.

Elsewhere, the economic reports on Wednesday were somewhat more positive.

US economic data on Wednesday were quite positive. The Institute for Supply Management-Chicago reported that its business barometer fell to 56.5 in August from 58.8 in July, remaining well above 50. Factory orders jumped 2.4 percent after falling 0.4 percent in June. ADP reported that private employers added 91,000 new jobs this month following a gain of 109,000 in July.

Meanwhile, Japan's recovery from the earthquake and tsunami in March continues, albeit at a slower pace. Industrial production in Japan rose 0.6 percent in July following a 3.8 percent gain in June. The Nomura/JMMA Manufacturing Purchasing Managers' Index for August was 51.9, down from 52.1 in July.

In the euro area, inflation remained unchanged in August at 2.5 percent while unemployment was unchanged at 10.0 percent in July.